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Japan's Jomo is winning customers by redesigning its stations to make lingering fun.

By Mariko Mikami

October 1, 2004

(Business 2.0) – Competitors call it "the car-wash dance." Two men in blue outfits gyrate around a vehicle, slicing hoses through the air like samurai swords. They towel off the car, their movements perfectly choreographed. Customers watching from behind a glass wall sometimes applaud.

Jomo, Japan's sixth-largest gas station chain, has long offered car washes. But last year, in hopes of higher sales and profits, the company began remodeling its stations so drivers would actually enjoy waiting for time-consuming services. To create the new format, called Value Style, Jomo tapped a leading Tokyo restaurant designer, who introduced not just spiffier pumps but also comfortable cafes, kiddie areas, and massage chairs. "Our objective is to make hanging around more fun," says Jomo retail sales support manager Yukihito Fujita.

Post-makeover results are startling. In July, at the eight Value Style stations open for at least three months, average monthly vehicle visits per station were up 22 percent over the previous year, from 10,770 to 13,106, driving a 15 percent sales increase, from $361,266 to $414,158. Per-station operating profit jumped 82 percent, from $7,051 to $12,854. The gains are especially impressive in Japan because selling gas there isn't as profitable as it once was. Thanks to Japan's 1996 deregulation of retail gas—which legalized self-service and invited foreign competition—industry operating profits plummeted from $3.8 billion 10 years ago to $1.6 billion last year.

American gas stations reacted to similar challenges by turning themselves into convenience stores. But in Japan, where 7-Elevens and vending machines are found on practically every street corner, chocolate bars aren't the answer. Instead, Jomo has stressed vehicle services in advertising campaigns since 1994. Today revenue from non-gas sales is as high as 70 percent at some Jomo stations, compared with an industry average of 50 percent, and Jomo is the only major Japanese-owned chain that has maintained market share—10.4 percent—since deregulation. Value Style, therefore, is the retail embodiment of Jomo's long-term commitment to services. "Gasoline flows from high places to low places," says Jomo sales director Fumihiko Shirasaka. "But in service industries, customers flow from low levels to high ones."

So far, Jomo has converted 30 stations at a cost of about $46,000 apiece, and the company plans to roll out Value Style at nearly half of its 4,000 locations within three years. Shirasaka says the upscale atmosphere attracts not only more customers but also owners of higher-end vehicles, who spend more on maintenance and repairs. Still, don't expect shiatsu at your local Shell anytime soon. According to Dennis DeCota, executive director of the California Service Station and Automotive Repair Association, despite experimental pairings with everything from fast food to dry cleaning, U.S. station owners typically want customers out quickly so pumps stay clear. He can imagine, however, Jomo-like changes at U.S. repair shops. "You're lucky if there's a TV in Jiffy Lube's waiting rooms," he says. "They're boring." — MARIKO MIKAMI

Note: Based on July results of the eight Value Style locations opened as of April. Source: Japan Energy (Jomo)